Questions raised around South Africa’s land expropriation and international investors

The highly anticipated Expropriation Bill was tabled in the National Assembly in October against the backdrop of a turbulent economy and rigorous debate on how to achieve an equitable distribution of South Africa’s resources.

Law firm Cliffe Dekker Hofmeyr said that the bill has caused controversy, uncertainty and confusion regarding the impact it will have on South African and foreign property owners alike.

The introduction of ‘expropriation with nil compensation’ has caused the bulk of the debate, especially with our law’s current approach to the reading of section 25 of the Constitution – preventing the arbitrary deprivation of property and allowing for expropriation subject to just and equitable compensation, it said.

However, the bill is silent on foreign property owners altogether. Given this silence, it is presumed that such property will be treated in the same manner as locally owned property, the firm said.

“Any preference given to foreign owners (or local owners for that matter) may constitute unfair discrimination based on nationality, which would be clearly unconstitutional.

“Despite the need for equal treatment between foreign and local property owners, the Bill is silent on how service of necessary documentation and publication for that matter is to be effected in respect of foreign-owned property targeted for expropriation.

“It is important to address the fact that the Expropriation Bill attempts to instil a uniform process which derogates from the notion that expropriation, with or without compensation will be carried out arbitrarily.”

Silence on international investors

Cliffe Dekker Hofmeyr said that the Expropriation bill provides rigid procedural steps which the expropriating authority must adhere to, with these steps being essential to safeguard against any arbitrary or improper deprivation of property.

The firm said that these procedural steps are founded in the following categories:

  • Investigation and valuation of the property by the expropriating authority;
  • Service of a notice of intention to expropriate on the owner and other right holders;
  • Negotiations regarding appropriate compensation; and
  • Service of notice of expropriation (once the decision has been made to expropriate).

“The procedural steps are silent regarding property owned by foreigners, especially foreign property owners who reside outside the confines of South Africa,” it said.

“This begs the question of how foreign property owners will be treated in accordance with the Expropriation Bill, and whether the Bill will incorporate provisions to deal specifically with foreign property owners.”

Section 7(1) of the Expropriation Bill provides that once the expropriating authority intends to expropriate property it must serve a notice of intention to expropriate on the owner and any known holder of a right in the property”.

The bill, however, is silent on how service will take place on foreign property owners, Cliffe Dekker Hofmeyr said.

The bill defines “service” in relation to such notices as follows: “to serve by delivery or tender, post, publication or in accordance with the direction of a court, and ‘serve’ has a corresponding meaning”.

Given the requirement to provide the owner of the property with due notice, the failure to provide an adequate process for service on foreign owners presents procedural hurdles to overcome, said Cliffe Dekker Hofmeyr.

“Without express direction regarding service on foreign property owners in the bill, one can gather that should a foreign property owner require service of a notice of intention to expropriate, same will have to be dealt with in accordance ‘with the direction of the court’, which would require the expropriating authority to approach the High Court for direction in respect of service – which seems rather cumbersome should there be alternative options available to the expropriating authority.”

Barrier 

The absence of a protocol for notifying foreign owners of an intended expropriation presents a severe barrier to the requirement to actively participate with owners prior to any expropriation, said Cliffe Dekker Hofmeyr.

“In the absence of foreign property owners receiving notice of the expropriation, the expropriating authority runs the risk of acting arbitrarily and against public interest when expropriating foreign-owned property.

“As with other service-related matters regarding foreign parties, a rigorous service process for foreign owned property that is targeted for expropriation can and must be developed to address these concerns.”

Cliffe Dekker Hofmeyr said that there is no doubt that the Expropriation Bill will cause grave concern among foreign investors.

However the legislature is required, especially to address the pushback it may encounter, to ensure it crosses the “t”s and dots the proverbial “i”s as far as procedure is concerned, it said.

“In light of the extensive public, political and legal scrutiny of the Expropriation Bill, the bill’s procedural and substantive provisions must be carefully interrogated.

“This will assist in ensuring constitutional compliance, while assisting the State to achieve the desired redress as well as affording adequate protection to private property owners.”

  • Commentary by Burton Meyer (director), Claudette Dutilleux (senior associate) and  Jonathan Sive (candidate attorney) of law firm Cliffe Dekker Hofmeyr. 

Read: Know your rights when renting in South Africa – including deposits and breaking a lease

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Questions raised around South Africa’s land expropriation and international investors